Corporate Law and Corporate Responsibility - Business Ethics (2023)

learning goals

At the end of this section you can:

  • Explain how investors and owners benefit from doing business as a company
  • Define the concept of shareholder primacy
  • Discuss the conflict between shareholder primacy and corporate social responsibility

Company law, which allows companies to take advantage of a legal framework that separates liability from ownership and control, was introduced in most states in the 19th century. Separation of ownership and liability means that owners of modern trading companies, as opposed to individual owners and partners in partnerships, enjoy the benefit of limited liability for the company's debts and other financial obligations, a concept central to the US economy built on capitalism. economic system stands. 🇧🇷

The benefits of corporate status

The concept of limited liability means that the owners (shareholders or shareholders) of companies, as well as directors and managers, are protected by laws that state that in the event of the company's bankruptcy, their losses will, in most cases, be the amount paid for their shares would. of property ((Figure)🇧🇷 The same protections apply to owners of certain other business entities, such asLimited Liability Companies(GMBH). An LLC is similar to a corporation where the owners have limited liability; however, it is organized and managed more in a spirit of partnership. To provide owners with limited liability protection, several types of corporations are possible in each state, including a corporation, an LLC, a limited liability partnership, and a limited partnership.

Company shareholders elect directors who appoint the company's executives - all of whom benefit from limited liability. (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Without state incorporation laws, entrepreneurs would be held personally liable for business losses, which could lead to several disadvantages. Ownership would be more risky, so owners might find it harder to sell their shares. They may also be subject to income tax on a pro rata basis. These types of personal financial responsibilities can limit a company's ability to raise capital through the sale of stock. Limited liability increases the attractiveness of investing to potential new shareholders by reducing the amount a shareholder can lose investing in a company by purchasing its shares. Ultimately, corporate status increases both the potential number of willing investors and the amount of capital they are likely to invest. After all, would you be willing to invest your money in a company knowing not only that you could lose the capital invested, but also that you could be personally sued for all of the company's debts?

Corporate status is given to a company by state laws (statutes) when a state enacts a corporate charter. The shield ofcompany statusIt allows companies to socialize their losses in ways that traditional ownership and partnerships cannot.convivialityA loss is a means of amortizing it or spreading it across society as a whole so that individual owners do not absorb it. Amortization is similar to the idea behind insurance, where many people bear a small portion of a loss instead of one or a few people bearing everything. Therefore, it is correct to say that society enables companies, both by enacting the laws that create them and by limiting the financial risk of their owners. Because our society grants for-profit corporations the right to establish and earn unlimited profits with limited liability, a reasonable person would conclude that corporations owe society a debt in return. Corporate quid pro quo - a Latin term meaningthat for– is the assumption ofcorporate social responsibility, for the benefit of the many stakeholders to which companies may have responsibilities, including customers, the community, the environment, employees, the media and government ((Figure)).

Typical stakeholders of a company include (but are not limited to) its customers or customers, the community in which it operates, the natural environment, its employees, the media, and government. (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Balancing the many responsibilities of a company

An old ethical debate about corporate social responsibility asks whether a company really has a duty to society or just to its shareholders. The series of important court cases shaping this issue spans nearly a century and includes a number of landmark cases involving theFord Motor Company, Wrigley Company und Hobby Lobby.

noDodge gegen Ford Motor Company(1919) the Michigan Supreme Court ruled in favor of shareholder preference, saying that founder HenryFordFord Motor Company must operate primarily in the interest of maximizing the profits of its shareholders.

In the traditional company model, a corporation generates income and distributes the profits after deduction of costs in the form of dividends to the shareholders. Ford had announced that his company would no longer be paying large dividends to shareholders, instead using its profits to achieve a number of other goals, including improving product quality, expanding the company's facilities and, perhaps most surprisingly,... reduction in prices. Shareholders then sued Ford, asking the court to order Ford Motor Company to continue using most of its profits to pay large dividends. (It's ironic that the named shareholders suing Ford were the Dodge brothers, former Ford parts suppliers who had recently started their own car company.)

At the hearing, Ford ((Figure)) testified that he believed his company was profitable enough to reflect his broader commitment to engage in activities for the benefit of the public, including his employees and customers. This was a unique position for the founder and principal owner of a large corporation in the early 20th century. During the rise of capitalism in the United States, most owners only wanted to maximize profits because that was the primary basis of their ability to attract and reinvest capital in the company. Most investors were more interested in a healthy return on their investment than in any kind of social good. Shareholders argued that the concern Ford expressed for its employees and customers was unreasonable and illegal. The court agreed, and Ford was forced to abandon its management goal of balancing profits and pursuing broader social goals.

1913 Workers are shown at work on a Ford (a) assembly line in Highland Park, Michigan. In theDodge gegen Ford Motor Company(1919) the Michigan Supreme Court ruled that Henry Ford (b) must operate the Ford Motor Company primarily in the interests of maximizing the profits of its shareholders and not in the broader interests of its employees and customers. (Credit a: Modification of "Ford Assembly Line - 1913" by unknown/Wikimedia Commons, public domain; Credit b: Modification of "Portrait of Henry Ford" by Hartsook/Wikimedia Commons, public domain)

Ironically, in the same case, the court upheld the validity of a doctrine known as the "Rule of Business Judgment," a common law principle that states that officers, directors and managers of a corporation are not liable for losses where evidence shows that decisions were reasonable and made in good faith, giving management the freedom to decide how the company should be conducted.

In essence, the Business Judgment Rule states that a court will not challenge the decisions of a company's managers or directors.

The legality and appropriateness of social responsibility as corporate policy has come a long and stony road since 1919. For example, in the 1950s and 1960s, some state courts rejected the shareholder primacy doctrine, instead ruling that an interpretation of the broad rule of corporate judgment allowed managers discretion in allocating company assets, including social awareness programs.

In 1968, in a high-profile case, the court ruled that the board ofFirma Wrigley, famous for baseball and gumball, had significant discretion in deciding how to balance interest groups' interests.

(Video) Business Ethics: Corporate Social Responsibility

the case ofShlensky gegen Wrigley(1968) revolved around the ownership of William Wrigley Jr. of the Chicago Cubs. The baseball team vehemently refused to install the necessary lights for night games at Wrigley Field, even though every other major league ballpark had lights. Instead, the Cubs respected the local community's belief that nighttime baseball games and the lights that came with them would negatively impact the neighborhood and create more opportunities for crime. In the eyes of some investors, however, the Cubs' decision hurt shareholders' gains. The shareholders disputed the Wrigley Company, but the Cubs' owners won the case.

The Wrigley case represented a change in the notion that companies should seek only to maximize shareholder value, as had been asserted in the Ford Motor Company case.

In the wake of that affair, lights were finally installed at Wrigley Field in 1988, but only after the owner, William Wrigley III, sold the team (1981) to the Tribune Company, a major media conglomerate that struggled with installation for six years lights. However, the case sets a precedent for management's ability to balance multiple interests and gains when making decisions.

Dodge x Ford(1919) zShlensky gegen Wrigley(1968) reasoned the dynamic nature of the shareholder primacy doctrine debate and suggested a shift in both legal thinking and precedent to give management more agency in deciding how best to run a company. A recent decisionBurwell vs. Hobby Lobby(2014) demonstrates what some consider to be the double-edged sword of this latitude.

In a 5-4 decision in favor of Hobby Lobby, the Supreme Court ruled that some companies (closely controlled by a few shareholders) may object to the Affordable Care Act, which requires health insurance to take various forms, on ethical, moral, or religious grounds of contraception cover; These companies may choose not to offer this coverage.

The majority opinion in the case was drafted by Justice Samuel Alito, along with Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas and Anthony Kennedy. In essence, the court ruled that entrepreneurs could put their personal values ​​first and pursue their own agenda. The case received a lot of publicity, some of it quite negative. In essence, the court ruled in this case that "corporate law does not require for-profit corporations to seek profit at the expense of everything else."

similar to the Chicago Cubs/Wrigley Field decision.

The decision was a victory for the family that owns Hobby Lobby, and was praised by some and criticized by others for expanding the rights of business owners. Some analysts believe that this represents more than an extension of management prerogatives and expands the right of companies to be treated as "persons". The Hobby Lobby case can be interpreted as meaning that the people who control companies (owners and/or managers) can act according to their own values ​​in a way that may not be compatible with the interests of employees and other minority shareholders. In the majority decision, Alito wrote: "An enterprise is simply a form of organization used by people to achieve desired goals. When constitutional or legal rights are extended to corporations, it is about protecting the rights of those people.”

Hobby Lobby is primarily family-owned, and Alito's comments seem to indicate that a different reading would limit the case's applicability only to privately held companies where the majority of the stock is owned by a small number of shareholders.

Some might think that Henry Ford's attempt to forego profits to pay workers higher wages was a good choice, but don't consider Hobby Lobby's preference for limiting health insurance benefits for female employees on religious grounds. However, the law must be interpreted logically: if you give management the prerogative to put a social cause before profit, shouldn't management also be able to pursue any social cause of its choosing? Extending the logic used in the Hobby Lobby case could extend the corporate rights of the personality doctrine, for example by allowing the individual's right to privacy to become a shield against regulatory scrutiny by government agencies (although a corporation is not a natural person). ).

Another potential issue with allowing more management rights to pursue social agendas is protecting the interests of minority shareholders who disagree with the majority. Because corporate law is state law, protections for minority shareholders vary widely, but owners of a small number of shares have little or no power to influence company decisions. Some states allow cumulative voting for board seats, increasing the power of minority shareholders. Others permit takeovers or dissolution statutes that apply to closely held companies. In a large traditional company, however, none of these minority ownership protections are likely to apply. Another possibility, of course, is that disgruntled shareholders sell their shares.

The two sides of the corporate responsibility debate

the question aftercorporate social responsibilityIt is the subject of high-level global discussions and debates between leaders in the public and private sectors, such as: B. the annual meeting of the World Economic Forum in Davos, Switzerland. Several reputable academic centers also host forums on CSR, such as Stanford University's Center for Democracy, Development and the Rule of Law and Harvard Law School's Forum on Corporate Governance and Financial Regulation.

As we have seen, the slow but steady acceptance of CSR as a legitimate business concept has led to the legal and ethical position that business leaders and managers can exercise business judgment and discretion in running a business. There are several reasons for this development: a) the fact that society allows LLCs to exist, b) the extent of economic power that corporations wield, and c) the desire of corporations to act responsibly to avoid broader government regulation. Managers are generally granted a great deal of freedom as long as they can refer to a rational interpretation of their actions in terms of the long-term benefit of the company as a whole. The combination of economic and political power in the world's largest companies requires leaders to consider the interests of a broader group of stakeholders, not just shareholders. In fact, social, environmental and charitable programs often create shareholder value rather than detract from it. And fulfilling commitments to all of a company's stakeholders—including those who do not own stock—is the moral minimum a company must adopt in order to meet the basic threshold of ethical conduct.

A recent study by researchers at Princeton and the University of Texas shows that companies benefit in several ways from complying with CSR guidelines.

These benefits are collectively referred to as the “halo effect” and can add value to the business. For example, consumers often see CSR spending as an indirect indicator that a company's products are of high quality, and they are also often more willing to buy those products as an indirect way to donate to a good cause.

However, some economists such as Milton Friedman, Henry Hazlitt, Adam Smith and others have argued that CSR initiatives are more based on environmental or social justiceBordershareholder wealth.

Economics Nobel Laureate MiltonFriedmann(1912–2006) believed that shareholders should be able to decide for themselves which social initiatives to donate to or participate in, rather than having an executive decide for them. He argued that both government regulations and corporate social initiatives allow an outside third party to make these decisions for shareholders.

In Friedman's view, too much power seized by corporate leadership to pursue a social agenda can lead to a form of corporate autocracy. Proponents of the profit maximization principle believe that reducing air pollution below legal levels, requiring suppliers to participate in a sustainable supply chain initiative, or paying lower-level employees salaries above legal requirements is a waste of corporate resources . Minimum wage. Friedman asserted that "doing good deeds" is not the job of corporations; It is a right of those who want to do it, but it should not be imposed on those who don't want to. His philosophy is that socially oriented initiatives correspond to a form of external regulation, resulting in higher costs for companies pursuing socially responsible policies.

When Friedman articulated this position in the 1970s, it reflected the prevailing view of corporate law held by most American stockholders and commentators at the time. In the years since, however, Friedman's perspective has fallen out of favor. This doesn't invalidate his point, but shows that public opinion about companies changes over time. The subjectivity or relativity with which we view corporations, along with their perceived rights and obligations, is an important issue addressed in this text.

Do company directors have a special fiduciary duty to shareholders? A fiduciary duty is a very high level of legal responsibility for those who are managing someone else's money, including duties of care and loyalty. Some examples of relationships involving fiduciary duty are those between an estate trustee and its beneficiary, and between a fund manager and a client. According to the American Bar Association, the Rule of Business Judgment states that “corporate directors, as trustees, owe the company and its stockholders a fiduciary duty of care and fidelity in the discharge of their corporate duties. These duties of care include duty of care and duty of loyalty. 🇧🇷 🇧🇷 duty of care is the obligation to act in an informed manner; The duty of loyalty requires that the board and its directors act in good faith and put the best interests of the company and its shareholders ahead of the interests of any other person."

So the answer seems to be yes, corporate directors have a specific fiduciary duty to promote the best interests of the company. But what exactly does this obligation entail? Specifically, does this mean returning profits to shareholders in the form of dividends? As we have seen, these problems often spill over into the courts in the form of shareholder actions challenging the actions of directors and/or management.

(Video) What is Corporate social responsibility (#CSR) ?

The duty of loyalty also includes the duty of notification, as can be readoften quotedMeinhard against salmonFallof 1928 in which the New York Circuit Court of Appeals held that business partners may owe one another a fiduciary duty with respect to business opportunities that arise in the course of the partnership.

UCLA law professor Steven Bainbridge wrote in theNew York Times: "If directors could deviate from maximizing shareholder wealth, they would inevitably turn to indeterminate patterns of equilibrium that offered no accountability."

In support of his position, Bainbridge pointed to a 2010 caseeBay Domestic Holdings Inc. gegen Newmark, in which a Delaware court ruled that company directors are bound by fiduciary duties and standards that include "acting to increase the value of the company for the benefit of its shareholders."

However, Lynn Stout, a professor at Cornell University Law School, wrote a contrasting article inNew York TimesIn it she said: “There is a general belief that corporate leaders have a legal obligation to maximize corporate profits and shareholder value – whether that means circumventing ethical rules, harming the environment or harming employees. But this belief is completely wrong. Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.”

Your opinion is based in part on the Hobby Lobby decision mentioned above.

So while ethicists may agree that corporations owe social responsibility to society, legal scholars still disagree on this point. The fact that we have seen conflicting court decisions over the last century confirms the lack of legal consensus. Of course, both legal and ethical opinions are in constant flux, so the state of the debate today is far from indicative of where it will be ten years from now. On this issue, public opinion, as well as that of politicians and even the courts, is like a pendulum, swinging back and forth, usually between centre-right or centre-left views rather than between extremes. However, the pendulum resets from time to time, and the arc in which it swings may differ from season to season.

Unilever “Improving Livelihoods” through Project Shakti

According to management guru Peter Drucker, whose ideas have been instrumental in laying the foundations of thinking about how modern business works, employees “need to know and believe in the organization's mission”. How do organizations ensure this engagement? Satisfaction of workers' values.

A program from Unilever, a Dutch-British multinational based in Rotterdam and London, illustrates the kind of values-driven company Drucker describes.Projekt Shaktiis a Unilever CSR initiative in India that combines corporate social responsibility and financial opportunities for local women.

It is considered an important example of micro-entrepreneurship and extends the concept of sustainability not only to environmental issues, but also to economic opportunities and financial networks in underdeveloped areas.

The goal, according to Unilever, is to give rural Shakti women the opportunity to earn money for themselves and their families as micro-entrepreneurs. Unilever's subsidiary in India, Hindustan Lever, has initiated training programs for thousands of women in small towns and villages across India to help them understand how to run their own small individual businesses as distributors of the company's products. With the support of a team of rural sales managers, the women who were unable to support themselves are now empowering themselves by learning how a supply chain works, the products Hindustan Lever makes and how to distribute them. Sales managers also act as advisors to help with business fundamentals, money management, negotiation, and related skills that help women run their businesses effectively.

The program was so successful that Unilever expanded it to include Shakti men, usually the sons, brothers or husbands of women who were already in business. Men, who are essentially like delivery drivers, sell Unilever products using bicycles as a mode of transport, which allows them to cover a larger area than women on foot. Women spend most of their time running the business.

Project Shakti recruited over 100,000 rural participants, including around 75,000 women. The project has profoundly changed her life, and not just because of the revenue it brings. Women now have increased self-esteem based on a sense of empowerment and finally feel they have a place in Indian society. In line with Unilever's sustainability plan, Project Shakti is one of the company's best and most sustainable ways to address women's social issues. It enables Unilever to conduct its businesses in a socially responsible manner, helping women to help themselves while expanding the reach of its products.

critical thinking

  • Do you think Unilever sponsors the Shakti program to help women increase its own profits, or both? explain your answer
  • If Unilever has mixed motives, do you think that discredits the company? It should?
  • How is this program an example of corporate and personal sustainability?
  • Could this model range be duplicated elsewhere, in a different area and with different products? Why or why not?

It is clear that many different stakeholders value corporate social responsibility, including some investors, shareholders, employees, customers and suppliers. In fact, some companies see CSR as a perfect long-term strategic opportunity to strengthen the company's fundamentals while making a contribution to society. Effective business leaders will seek to attract investors to the idea of ​​CSR by avoiding or minimizing the potential for litigation related to profit maximization. And innovative companies find ways to create added value for the economy and society at the same time.

Data analysis shows that following a corporate social responsibility policy does not necessarily mean losing money; On the contrary, many companies that take an ethical approach to doing business are actually quite profitable. Mutual funds, recognizing that investors care about sustainable investing, are now offering socially responsible funds and third-party rating companies, such as Morningstar Rating Funds, so potential investors can assess how well the companies they contain are performing in terms of environmental, social and governance meet challenges. An example of this type of fund is the Calvert Fund, which describes itself as “a leader in responsible investing with a mission to deliver superior long-term performance to our clients and enable them to make a positive impact”.

To beWebsite da Ellevesttakes you to a digital investment platform by women for clients. The idea was developed in 2016 by Sallie Krawcheck, who has worked for large Wall Street companies and has seen firsthand the challenges of taking an ethical approach to investing in traditional businesses, particularly for women.

The chart below looks at mutual funds and their returns over different time periods; Included are examples of general index funds and "socially responsible" vssocial index funds((Figure)🇧🇷 If we compare the twogeneral index fundsAt the top of the bottom three funds investing in socially responsible companies, we see a competitive return on investment in social funds. Social responsibility does not mean lower profitability.

This graphic shows that social responsibility can be profitable. (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Being socially responsible doesn't necessarily mean not being profitable. ThisVideo interview with George Pohleshows how ensuring that CSR is at the heart of a company's strategy can generate financial benefits. Pohle is Vice President and Global Leader of the Business Strategy Consulting Division at IBM Global Business Services.

(Video) What is the Relationship Between Corporate Responsibility and Ethics


While some argue that companies have a primary duty to maximize profits for the benefit of shareholders, others argue that companies have a duty to the society in which they operate, a duty that underpins the CSR philosophy. Many court cases have dealt with the issue, but it has not been conclusively resolved.

Despite the ongoing ethical debate, being a good corporate citizen is a goal that most modern businesses aspire to. An effective CSR policy generally means that companies must commit to an internal and external ethical approach. Corporate social responsibility and good corporate governance are really just two sides of the same coin. Social responsibility does not mean lower profitability.

evaluation questions

Right or wrong? Companies that apply CSR policies consistently generate lower returns on capital for shareholders.

NOT CORRECT. Social responsibility doesn't mean less profitability, as social index fund returns have shown.

Right or wrong? Milton Friedman's business philosophy advocates increased government regulation to ensure companies are socially responsible.

NOT CORRECT. Milton Friedman argued that shareholders should be able to choose which social initiatives to donate to or participate in, rather than having a corporate or government board decide for them.

Which is the followingNotreal?

  1. The supremacy of shareholders is the clear precedent in the United States.
  2. Maximizing shareholder returns is a legitimate management goal.
  3. Dividends are paid out of company profits.
  4. Companies that apply CSR guidelines can also be profitable.


The industry likes to determine its own destiny and therefore prefers self-regulation to government-imposed laws. Self-regulation is usually ________.

  1. based on external codes of conduct
  2. executed by the courts
  3. contrary to common law
  4. less costly to business than government regulation


Name two advantages for a company that pursues a Corporate Social Responsibility (CSR) policy.

One advantage is that consumers may prefer to buy products from a socially responsible company. A second benefit is that CSR can attract more investors or shareholders interested in investing in the company.

Closing remarks

2Dodge versus the United States. Ford Motor Company, 204 Mich. apartment 459, 170 NW 668 (March 1919).

3Dodge versus the United States. Ford Motor Company, 204 Mich. apartment 459, 170 NW 668 (March 1919).

4Dodge versus the United States. Ford Motor Company, 204 Mich. apartment 459, 170 NW 668 (March 1919).

5Shlensky vs. Wrigley, 237 N.E. 2d 776 (Fig. App. 1968).

6Shlensky vs. Wrigley, 237 N.E. 2d 776 (Fig. App. 1968).

7Burwell v. Hobby Lobby, 573 U.S. ________ (2014).

8Burwell v. Hobby Lobby, 573 U.S. ________ (2014).

9Burwell v. Hobby Lobby, 573 U.S. ________ (2014).

10"Corporate Social Responsibility: The Halo Effect",The economist, 25. June 2015.

11Milton Friedmann,capitalism and freedom. (Chicago: University of Chicago Press. 1963).

12Lindsay Llewellyn, „Breaking Down the Business-Judgement Rule“,American Bar Association, 30. May 2013.

13Stephen Bainbridge, „A Duty to Shareholder Value“, Meinungsseiten,New York Times, 16. April 2015.

14Stephen Bainbridge, „A Duty to Shareholder Value“, Meinungsseiten,New York Times, 16. April 2015.

fifteenLynn Stout, "Companies Don't Need to Maximize Lucros", Opinion Pages,New York Times, 16. April 2015.

16Rick Wartzman, "What Peter Drucker Knew About 2020"Harvard Business Review, 16. October 2014.


18Tracey Keys, et al., „Making the most of Corporate Social Responsibility“,McKenzie quarterly, December 2009.


(Video) Corporate Responsibility for Ethical Behavior

(Video) The social responsibility of business | Alex Edmans | TEDxLondonBusinessSchool


Business Judgement Rule
the principle that officers, directors and managers of a company shall not be liable for losses where evidence shows that decisions were made reasonably and in good faith
duty of loyalty
a very high degree of legal responsibility for someone managing someone else's money, including duties of care and loyalty
limited liability
Protection of a business owner against loss of personal property granted with business status
moral minimum
the minimum actions or practices that a company must undertake in order to meet the minimum threshold for ethical conduct
something for something
the exchange one makes to obtain something of value; from the Latin meaningthat for
shareholder primacy
Duty of a corporation to maximize profits for shareholders


What is corporate responsibility in business ethics? ›

Corporate Social Responsibility: a business philosophy which stresses the need for firms to behave as good corporate citizens, not merely obeying the law but conducting their production and marketing activities in a manner which avoids causing environmental pollution or exhausting finite world resources.

Is there a difference between business ethics and corporate responsibility? ›

Whereas business ethics includes the moral principles and standards that guide behavior in the world of business; corporate social responsibility (CSR) is an integrative management concept, which establishes responsible behavior within a company, its objectives, values and competencies, and the interests of ...

What is corporate social responsibility and business law? ›

Corporate social responsibility (CSR) is the idea that corporations have a moral responsibility to voluntarily integrate environmental, social, and governance (ESG) improvements into their business operations for the benefit of stakeholders (shareholders, employees, customers, suppliers, creditors, and host communities ...

What is the relationship between corporate social responsibility and business ethics? ›

In fact, both corporate social responsibility and business ethics are part of the other, which means that business ethics are part of corporate social responsibility or vice versa. In addition, locating an organization's “pressure points” that highlight the need for CSR action is recommended.

What are the 4 types of corporate responsibility? ›

CSR is generally categorized in four ways: environmental responsibility, ethical/human rights responsibility, philanthropic responsibility and economic responsibility.

What is an example of corporate responsibility? ›

Examples of Corporate Social Responsibility in Action

Some of the most common examples of CSR include: Reducing carbon footprints. Improving labor policies. Participating in fairtrade.

What are the three 3 types of business ethics? ›

Like organizational behavior, business ethics impact a company at three different levels. These levels are personal, professional, and organizational.

What are the 5 components of corporate responsibility? ›

5 CSR Strategies Socially Responsible Companies Are Using
  • Promoting Healthy and Inclusive Workplace Cultures. ...
  • Designing Goals with Measurable Impact. ...
  • Aligning Community Impact Goals with Business Practices. ...
  • Socially Responsible Companies Leverage Their Core Capabilities.

What is the difference between ethics and responsibility? ›

Ethics can be defined as individual, occupational, organizational, or societal morals and values, while social responsibility is the practical application of ethical concerns for the benefit of society as a whole. There are four types of ethics: individual, occupational, organizational, and societal.

What are the three 3 basic principles of corporate social responsibility? ›

It is therefore imperative to be able to identify such activity and we take the view that there are three basic principles which together comprise all CSR activity. These are: Sustainability; • Accountability; • Transparency.

What are the 3 corporate social responsibility? ›

What are the three pillars of CSR ? The three pillars are economic, social and environmental. A company's sustainable development strategy focuses on these three key topics and action plans are created based on them.

What is meant by corporate responsibility? ›

Corporate responsibility (CR) is about the impact an organisation makes on society, the environment and the economy. Having an effective CR programme contributes positively to all stakeholders as well as adding value for the organisation itself, and ensures it operates in a sustainable way.

What are the 7 pillars of CSR? ›

Generally, corporate social responsibility initiatives are categorized as follows:
  • Environmental responsibility. ...
  • Human rights responsibility. ...
  • Philanthropic responsibility. ...
  • Economic responsibility. ...
  • Stronger brand image, recognition, and reputation. ...
  • Increased customer loyalty and sales. ...
  • Operational cost savings.
Nov 26, 2022

What are the types of corporate ethics? ›

Key Takeaways

The discipline comprises corporate responsibility, personal responsibility, social responsibility, loyalty, fairness, respect, trustworthiness, and technology ethics.

How do you apply corporate responsibility in the workplace? ›

Some ways that a company can embrace CSR include being environmentally friendly and eco-conscious; promoting equality, diversity, and inclusion in the workplace; treating employees with respect; giving back to the community; and ensuring business decisions are ethical.

What are the 4 approaches of business ethics? ›

From the earliest moments of recorded human consciousness, the ethical discipline has exhibited four fundamental "approaches" These four approaches are often called "ethical decision-making frameworks:" Utilitarian Ethics (outcome based), Deontological Ethics (duty based), Virtue Ethics (virtue based) and Communitarian ...

What are the 3 golden rules of ethics? ›

Regard bad for yourself whatever you regard bad for others. Accept that (treatment) from others which you would like others to accept from you ... Do not say to others what you do not like to be said to you.

How is business ethics different from law? ›

The law consists of a set of rules and regulations, whereas Ethics comprises of guidelines and principles that inform people about how to live or how to behave in a particular situation. ... The law creates a legal binding, but ethics has no such binding on the people.

What are stages of corporate responsibility? ›

Carroll's pyramid of corporate social responsibility has four levels: the economic, the legal, the ethical, and the philanthropic.

What are the 4 four four dimension of CSR? ›

Corporate social responsibility is traditionally broken into four categories: environmental, philanthropic, ethical, and economic responsibility.

What are the 4 main reasons to support corporate social responsibility? ›

What Are the Benefits of Corporate Social Responsibility? Embracing CSR increases customer retention and loyalty, increases employee engagement, improves brand imaging, attracts investment opportunities and top talent, and makes a difference for bottom-line financials.

Why is responsibility important in ethics? ›

The concept of ethical responsibility has to do with those issues and problems that are pertaining to business people's loyalty to their organisations are as well as their customers. While social responsibility on the other hand concerns to the problems, interests and needs of the society of larger.

Why do we consider ethics as responsibility? ›

We need to be ethical because it defines who we are individually and as a society. These are norms of behavior that everyone should follow. Our society might fall into chaos if we accept that each of us could pick and choose what the right thing to do is.

Is responsibility an ethical issue? ›

Social responsibility is an ethical theory in which individuals are accountable for fulfilling their civic duty, and the actions of an individual must benefit the whole of society.

What are the 2 major objectives of corporate social responsibility? ›

The purpose of corporate social responsibility is to give back to the community, take part in philanthropic causes, and provide positive social value. Businesses are increasingly turning to CSR to make a difference and build a positive brand around their company.

What is corporate responsibility ethics & accountability? ›

Corporate accountability maintains that businesses should be held responsible for the impact of their actions on society and the environment. It is also an important concept for investors and shareholders concerned with ethical investing. This strategy involves choosing investment based on ethical principles.

What are the six main characteristics of corporate social responsibility? ›

  • Sustainable development practices.
  • Transparency and accountability.
  • Maintain good stakeholder relationship management.
  • Advocacy on different aspects of human rights, justice and democratic principles.
  • Compliance with accepted international standards on CSR.
  • Ethical business practice.

Is corporate responsibility a law? ›

Corporate social responsibility (CSR) is typically assumed as a voluntary initiative rather than a legal mandate. Yet, over the past few decades, the world has witnessed the rise of explicit CSR legislation—a body of laws that specifically target corporations and explicitly incorporate CSR or its synonyms.

What are the benefits of corporate responsibility? ›

What are 7 main benefits of corporate social responsibility (CSR)?
  • Increases employee engagement.
  • Increases revenue.
  • Supports local and global communities.
  • Increases investment opportunities.
  • Presents press opportunities.
  • Increases customer retention and loyalty.
  • Helps attract, retain and develop talent.

Why do businesses have corporate responsibility? ›

CSR can help companies attract and retain talent in their workforce. Research by NEEF found that nearly 90% of employees engaged in their company's sustainability work say it enhances their job satisfaction and overall feelings about their workplace.

What is corporate responsibility and why is it important? ›

Corporate social responsibility is a business model by which companies make a concerted effort to operate in ways that enhance rather than degrade society and the environment. CSR helps both improve various aspects of society as well as promote a positive brand image of companies.

What is the purpose of corporate responsibility? ›

What is the purpose of corporate social responsibility? The purpose of corporate social responsibility is to give back to the community, take part in philanthropic causes, and provide positive social value. Businesses are increasingly turning to CSR to make a difference and build a positive brand around their company.

What is corporate ethics in simple words? ›

Business ethics, also known as corporate ethics, is a type of applied ethics (ethics focused on real-world scenarios) that focuses on the theories, principles, and values that govern business practices. Business ethics can be a written set of rules or an ethical code that governs a particular company's ethical conduct.

What are the benefits of corporate responsibility for a business? ›

Benefits of corporate social investment for businesses

increased sales and customer loyalty. operational costs savings. better financial performance. greater ability to attract talent and retain staff.

Why is responsibility important in business ethics? ›

Ethical responsibility is concerned with ensuring an organization is operating in a fair and ethical manner. Organizations that embrace ethical responsibility aim to practice ethical behavior through fair treatment of all stakeholders, including leadership, investors, employees, suppliers, and customers.

What are the three pillars of corporate responsibilities? ›

What are the three pillars of CSR ? The three pillars are economic, social and environmental. A company's sustainable development strategy focuses on these three key topics and action plans are created based on them.

What are the 7 basis of CSR? ›

Key CSR issues: environmental management, eco-efficiency, responsible sourcing, stakeholder engagement, labour standards and working conditions, employee and community relations, social equity, gender balance, human rights, good governance, and anti-corruption measures.

What is corporate legal responsibility? ›

Corporate legal liability is a corporation's legal responsibility related to any criminal actions — or in some cases, their failure to act — that were committed by the employees of the corporation.

What are corporate responsibility issues? ›

CSR therefore covers a broad spectrum of issues that must be taken into account in business conduct. This includes working conditions, human rights, the environment, preventing corruption, corporate governance, gender equality, occupational integration, consumer interests and taxes.

What are examples of corporate ethics? ›

Examples of ethical behaviors in the workplace includes; obeying the company's rules, effective communication, taking responsibility, accountability, professionalism, trust and mutual respect for your colleagues at work.

What are the 4 types of ethics in business ethics? ›

Corporate ethics codes often include subjects like social responsibility, insider trading, discrimination, corporate governance and bribery.
7 types of business ethics
  • Personal responsibility. ...
  • Corporate responsibility. ...
  • Loyalty. ...
  • Respect. ...
  • Trustworthiness. ...
  • Fairness. ...
  • Social and environmental responsibility.
Nov 5, 2020

What is the most important ethics in business? ›

Business ethics inform a company's values and goals, as well as how it runs its day-to-day operations. An ethical company runs on principles such as honesty, integrity, fairness, trustworthiness, accountability, and respect for others.


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